Recent RESPA Settlements Show HUD Means Business Against Markups

Recent opinions of the U.S. Court of Appeals regarding the fee-splitting prohibitions of the Real Estate Settlement Procedures Act have buoyed Department of Housing and Urban Development lawyers who maintain the cases have confirmed their long-held position that markups of appraisals and other settlement services provided by third-party vendors violate RESPA. Of the six U.S. appeals courts that have ruled on markups, the results have been split. The first three opinions went against HUD's position, with rulings that the statute prohibits fee-splitting between two parties, not markups by a single party. However, the three latest decisions have ruled against such markups. See my earlier series "Kickback or Markup" In remarks before attendees of a RESPA conference sponsored by the National Real Estate Development Center, HUD assistant general counsel Peter Race said, "The decisions in the recent cases have undercut the rationale in the earlier cases. It is hard to argue that the statutory language is clear on its face when three other circuit courts and HUD (the agency charged with enforcement of the statute) are taking a different position," he said. The Appraisal Institute has had a long-standing opposition to the mark-ups. Don Kelly, vice president of Public Affairs said, "Lenders jacking up appraisal fees while providing no additional service to borrowers is outrageous. We've fought against this practice for years now and it's good to see the courts are agreeing with us." In the past 18 months, HUD has been very aggressive in investigating and pursuing cases involving referral fees and sham affiliations. Of the 45 settlements in the history of RESPA, the department settled 14 cases last year. Race said, "HUD will continue to closely look at markups of third-party charges. And we will take action when there is no work done or little work done to justify a markup of charges." Source: Appraisal Institute News